Q1 2022 CCL Industries Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to CCL industries fourth quarter Investor update. Please note that will be a question and answer session. After the call. The moderator for today is Mr. Geoffrey Martin President and Chief Executive Officer, and joining him is Mr. Shawn washed Schott senior Vice.
President and Chief Financial Officer. Please go ahead gentlemen.
Thank you very much operator, and good morning, everybody welcome to our first quarter conference call.
Before we start with the numbers I just wanted to say a few words about the situation in the Ukraine, whereas southern does everybody in the world is about what's happening, but we're very proud of all the efforts of our employees around the world.
Donate money and goods and channels to the supposedly displace population and particularly our employees in Poland, Austria and Germany.
Organize the accommodation for.
Although a few hundred Ukrainian refugees, we're very proud of their efforts and I'd like to acknowledge that on the on the call here. This morning, but with that I'm going to hand, the call over to Sean is going to take you through the numbers.
Thank you, Jeff I'll turn everyone's attention to slide two our disclaimer regarding forward looking statements.
I'll remind everyone that our business faces known and unknown risks and opportunities.
For further details of these risks. Please look at our 2021 annual report in the MD&A. You can also refer to our Q1 report, which has some updated risk regarding the conflict in the Ukraine and additional supply chain challenges.
Our annual and quarterly reports can be found online at the company's website.
<unk> dot com or on SEDAR dot com.
So moving to the next slide.
Our summary of financial results for the first quarter of 2022 sales increased 12, 8% with organic growth of 10, 8% acquisition.
Acquisition related growth of four 5%.
Partially offset by two 5% negative impact from foreign currency translation.
Resulting in sales of 1.5 dollars 2 billion compared to 135 billion in the first quarter of 2021.
Operating income was $228 $6 million for the 2022 first quarter compared to $223 1 million for the first quarter of 2021 five.
Five 1% increase excluding the impact of foreign currency translation.
Jeff will expand on the segmented operating results of our CCL Avery checkpoints and <unk> segments momentarily.
Corporate expenses were up for the quarter, principally due to higher expense for long term variable compensation versus the prior year quarter.
Consolidated EBITDA for the 2022 first quarter, excluding the impact of foreign currency translation increased five 3% compared to the same period in 2021.
Net finance expense was $14 7 million.
For the first quarters of 2022 and 2021.
The overall effective tax rate was 24, 4% for the 2022 first quarter compared to an effective rate of 24, 2% recorded last year first quarter.
The comparative effective tax rates for the first quarters of 2022 was slightly higher due to a higher portion of taxable income being earned in higher tax jurisdictions.
The effective tax rate may change in future periods, depending on the proportion of taxable income that is earned.
And in different tax jurisdictions.
Net earnings for the 2022 first quarter were $150 2 million.
Up four 7%, excluding foreign currency translation compared to the first quarter of 2021.
Moving to the next slide earnings per share.
Basic earnings per class B share were <unk> 84 for the first quarter of 2022 compared to <unk> 82.
For the first quarter of 2021.
Adjusted basic earnings per class B share were <unk> 85.
For the 2022 first quarter compared to adjusted basic earnings per class B share of ADT.
For the first quarter of 2021.
The change in adjusted basic EPS to <unk> 85 is primarily attributable to five.
Advancing operating income.
<unk> from equity contributions from our JV, partially offset by negative currency translation and once that increased corporate costs.
Moving to our next slide.
Free cash flow from operations.
For the first quarter of 2022 free cash flow from operations was $38 $1 million.
Compared to $87 6 million.
In the 2021 first quarter.
An increase in net capital expenditures of approximately $43 million reduced free cash flow from operations for the first quarter of 2022 compared to first quarter of 2021.
For the 12 months ended March 31, 2022 free cash flow from operations decreased approximately $237 million.
Compared to the 12 months ended March 31 2021.
The comparative decline is attributable to an increase in net working capital coupled coupled with an increase in net capital spending.
Moving to the next slide our cash and debt summary.
Net debt as at March 31, 2022 was $1 $46 billion.
An increase of $214 million compared to December 31, 2021.
The increase is principally a result of new borrowings to finance the.
The acquisition of the Gab again in January and the repurchase of shares under the Companys and CIB.
At the end of the first quarter the company had repurchased in excess of.
One seven.
One 7 million shares for.
Approximately $100 million.
Although the company's net debt increased the balance sheet closed the quarter in a strong position our balance sheet leverage ratio was 124 times, increasing from one point Joseph times at the end of December 2021.
Liquidity was robust with $616 $9 million of cash on hand.
$1 billion.
Of available Undrawn capacity on the company's revolving credit facility.
The company's overall average finance rate was largely unchanged at approximately two 3% at March 31, 2022 compared to two 4% at December 31 2021.
The company's balance sheet continues to be well positioned as we move through fiscal 2022.
Jeff over to you. Thank.
Thank you Sean good morning, everybody I'm on slide seven highlights the capital spending Michelle just mentioned on the cash flow slide the cash.
Expenditures were up 43 million quarter on quarter, but we're pretty much in line with Q1 'twenty.
Before we saw the impact of the slowdown in capital expenditure in the Covid era.
<unk> right of use asset depreciation and Ryan for 60, and we are planning to spend $390 million for the year.
Slide eight highlights the CCL.
Seven 3% organic sales growth a lot of that price driven in North America and high single digit Europe mid single digit Asia Pacific low single digits, Latin America off a very strong 25%, where we gained some share.
Strong quarter in the home and personal care business offset tough tough comps at CCM secure we have a very good start to the business last year. So it's really more about all the time and anything going on in the business CCL design was slower in automotive than we expected.
<unk> was pretty good but it's much slower in automotive than expected full reasons, you've read about in the newspapers.
It was up in food and beverage and health care and specialty but profits were impacted by inflation and mix in the latter.
Slide nine highlights about JV is as everybody knows via press release, we've suspended our future any future investment in the joint venture in Russia, I apologize continues to run the business with the plants, we have the strong strong culture in the middle East.
Slide 10 highlights for Avery succeed.
Success stories for the quarter strong trajectory continues, especially in North America, where we had a good recovery of inflation and a very good recovery in the growth of same batches, which always back to almost back to pre COVID-19 levels. Most of tagging RFID hotel acquisitions outperformed.
All materials availability on inflation on elevated component comes from China remains challenging and it probably did.
Hold back out sales somewhat in the quarter, but our price policy is a very well done and there's more of that still to come in the second half of the year.
On slide 11 for checkpoint.
Next story here.
<unk> talked about ability of what we call our <unk> business grew in all regions, except Europe profits.
Profits were impacted by Chinese freight and component inflation, although we implemented some price increases the benefit of that but not really going to field for the second half of 2022, but that was more than offset by very strong growth in our apparel label business, 40% for the quarter organic driven by RFID, and then mentioned on top of that.
By the units.
Acquisitions, so so <unk>.
Outperformed it it may have some underperforming, but the total was above the prior year quarter.
The method of small metal price marketing operation in Germany was impacted by inflation.
You mentioned price increases, which will have impact in the second half of the year.
Slide 12 highlights <unk>.
Sales gains here is really all about resin and freight inflation pass through.
A big surprise for the quarter was the energy inflation surge, we experienced in Europe , what does that do to lose situation in the Ukraine did impact profitability, we have implemented pricing surcharges, which we've taken began to take effect in the beginning in the second quarter.
Some of the bedroom.
It moves ahead.
Changes to resin pricing in the Americas also impacted so we had.
The drop in resin prices in the latter part of last year, which we have to pass through to customers, but we had resin inflated resin prices in the inventory at that time, so if you've got a bit of a bit of a margin squeeze around that.
We've got the reverse impact of that in Q2's resins have increased again in North America.
Slide 13, some comments about the outlook.
Many inflation price pass throughs has been implemented that should benefit the coal CCL label businesses, especially in the second half.
Volume should continue to improve augmented by recent acquisitions checkpoint price increases are also underway.
RFID to continue to grow the airlines.
<unk> designed customer supply chain issues remain especially in automotive.
But recent acquisitions and new business wins are an offset.
The biggest concern we have for the upcoming calls as the situation in China with Lockdowns, it's affecting checkpoint in CCL design, which have very big operations in the country Q2 impact frankly, it depends on the duration and how long the government keeps things markdown that fold. So.
So some of that businesses are about in China are about domestic consumption and somewhere about production for the world markets and domestic consumption. So we think some of this demand constrained in China will be temporary and recovered so the demand for calls as license and that demand to soft consumer.
Probably if you lose that to monitor that and see it again, so that's a pretty mixed story the concept.
So difficult, but that's challenging at CCM secured for Q2 do ease significantly in the second half of 2022.
Then finally will be starting youll be HEICO flight line in Poland and this causes lots of customer interest there about enabling P. T. Both recycling by easy to sleep removal.
Very excited about that opportunity.
So with that operator wed like to open up the call for questions.
Ladies and gentlemen, the floor is now opened for questions. If you have any questions or comments. Please press star one on your phone at this time.
While paging. Your question you. Please pickup your handset. Please stay on the speaker phone to provide ultimate quantity. Please hold while we poll for questions.
Thank you. Your first question is coming from Adam Josephson of Keybanc, Adam. Please ask your question.
Yes, good morning.
I'm well, thanks, I hope the same goes for you Jeff.
Great.
Good good good good China, Jeff you mentioned Thats your biggest concern at <unk> can you give us a little more perspective on the impact in April and if that were to continue.
What that might mean for the balance of the quarter.
Well.
The problem, we've got ready to say much about April April was a shoulder month this year than it was last year.
So April added an extra workday in 2021 goes to 2022.
I, probably had more impact in China, but we did see some profit drop in China in the in the CCL design and checkpoint space because our clients a number of our clients were impacted by both shutdown measures.
Few million a few million dollars of EBIT will describe it now.
If I was a few million dollars.
The culture, because they end up being a much larger number so it depends on how quickly the.
The government allows allows things to normalize that.
The double double.
Question whether.
Whether youll found as impacted in terms of whether it's over the shot but more importantly, what's happening with the customer so.
So I'm sure most of the people on the call.
Tim Cook said about the impact on Apple.
And yesterday in the Wall Street Journal, There was an article about Tesla in China, which I'm sure a lot of people that Brett.
So I think everybody is waiting for the call to be pulled out of the bulk so things can get back to normal there but.
Right now, it's still a difficult country to operate in for sure.
Have you seen any recent changes Jeff for the better or worse, along those lines.
But I think there are signs that the government is beginning to let people back to work in the affected areas but.
But.
Is it an outbreak in city X or Y and the authority has come down pretty hard still so it's really it's really about where youll factories located in where your customers factories are located so things seem to be easing a little bit in Shanghai now. So that's that's a good thing, but obviously that Scott was so so.
It's a mixed story I would say and everyone everyone wants it to normalize I think the important thing Adam is.
I think if you think about it.
Cause phones, which was somewhat focused on in China.
To produce that in inventory, we might not sell it but we can still produce it in the plants to make it. So we will eventually get those sales come what may.
Where it's domestic consumption in China. So you.
The consumer business.
Lost sales of shampoo in China is really a loss sale for good.
So for a car in April may, but you may will still get it may and June so thats really the difference.
Thank you for clarifying that John in terms of demand more broadly how was it compared to what you expected in the first quarter what was it like in April .
And what are you thinking thereafter.
But I would say that Q1 results for us was better than we thought we might we might get I think a lot of that was due to we did a better job with the pricing execution I think that applies to a lot of companies both at customers retailers that everybody in the supply chain I think has done a good job of.
<unk> cost pass through so that was the positive surprise so to call. The demand is still relatively relatively strong.
In Q1, a bit stronger than we thought not at CCL secure but thats just all the timing.
Outside of that relatively strong and in <unk>, we saw a big bounce back as you'd seen so that was very pleasant surprise.
And three months ago, you said look demand is the million dollar question because theres all this inflation.
Passing on the huge price increases and we really don't know what the consumer.
Yes impact is going to be do you feel any differently now than you did three months ago.
No I think it is still the big the Big unanswered question is what will the demand picture looked like really in the second half of next year I think there'll be some noise in Q2 that there was in Q1.
But once the long term trend.
I think anybody has the answer to that.
I think everybody is waiting to see what really happens when.
So some of it's inflation noise dies down.
The impact is on the consumable the job market would be like what was the economy and.
What impact will have higher interest rates have on demand.
So on and so forth and the supply side returned to normal some malls.
I think a lot of the inflation at the moment is really supply side driven.
<unk>.
But the supply side returns to normal we'll have some calming effect on markets.
We don't know the answer that any more than anybody else does.
No I get that there are two other ones.
On that demand question again was it I would've thought that demand might have been hit more in Europe , just given the inflation is particularly acute there did you not see that are you not seeing that what are you seeing in Europe .
I'd say Europe .
Yes.
We still saw growth in Europe in Q.
This continued in Q2 so far.
But.
I don't think that Robin has hit the road yet so what the impact is on this whole situation in Russia.
Is still open to debate.
We're waiting to see but so far we haven't seen anything dramatically different from what we saw in Q1.
And just one last one on the NCI Beach FC last year, you had up to 8 million shares authorized through <unk>. I think you said you bought back one $703 million can you just talk to us about why not more than that obviously your balance sheet remains in very good shape, what are you expecting to buy roughly.
Number of shares over the past year again, just walk us through that situation. If you don't mind.
Well, we've already started buying back stock this past quarter and the limits of what we're allowed to do by the by the rules.
How much stock we can buy at any one quarter and how many trading days there are.
So you have to remember in Q1, we didn't release our results until the blackout periods most of the key one.
So we didn't have very many days, where we could buy back stock. So there are limits how much we can buy at any one time show up and talk you through that if you want.
No I appreciate that.
That sounds terrific. Thanks, Jeff.
Yeah.
Thank you. Your next question is coming from Walter Brooklyn of RBC capital markets.
Thank you very much operator, good morning, everyone.
Walter.
So maybe we could go back to the demand environment I think I heard you that food and beverage health care, yes, a lot of price increases as part of the organic growth there, but demand saw but it's the home and personal care, where I guess you had the most swings and disruption within the division right. I mean, there were a lot of a lot of products that were extremely in demand during pandemic and a lot that fell off significantly in.
And perhaps reversing now do you have any better sense now on on what the overall picture is with home and personal care now that now that we're going into a bit of a new normal here.
Well I would say it is.
It was very strong in Q1 in North America, So North America, Mexico, and the U S.
No.
Those markets, Brazil, all segments was strong.
Throughout the Americas.
Or is the demand picture is strong.
All the categories were already in those markets.
Aerosols tubes that label.
So things subsided like.
Like Sanitizers, obviously that was a negative but.
The upsize as well.
Things that are more cosmetic and travel related where we got a big bounce back so some good grades.
Things like that bounce back.
Internationally in Europe and in Asia.
There's a lot more muted but.
But the weighting of home and personal care is very much driven towards how we performed in the Americas.
And moving to pass throughs, I think you've done a great job with with pass throughs to date than you signaled some some more to come.
Can you walk us through how it pass through works is it simply you're just waiting until the contract renews and you build in a new pricing structure and secondly, when that new contract renews is there anything that you're doing differently now in terms of building in.
Perhaps some automatic or formulaic pass throughs like we see with fuel and others in other sectors is there any any opportunity for you in this demand environment to be able to.
Change a little bit the way you construct a car.
Contract to allow yourself, a better ability to pass through costs.
But we have thousands of contracts I mean literally thousands so and you have to remember it's across the whole spectrum of our businesses. So so.
So at Avery with dealing with retailers that the checkpoint with dealing with retailers.
CCL design at the automotive tier ones.
<unk> electronics Oems when you guys would consume a label business and you've got older P&g's Unilever's L'oreal is kind of the companies in HBC.
It's a pretty it's a pretty.
Broad broad picture and I wouldn't say, there's any there's any any rules for it but.
But.
Things are always changing in that business. So we've got some parts of the company, where we're able to just finance the price increases through all of this is where we have to go knock on the door and say this is what's happened in the world.
It would have to go out and.
If you can't get a price increase now rather than when you have it.
So it's probably.
Many of our customers are more focused today on supply visibility.
The price point, so again getting hold of what you need is as important.
And that's been able to as well as to what the price point is.
But I wouldn't say with changing particularly the dynamics of.
Our contractual arrangements and as you've seen we've.
Considering the degree of inflation, we've done a pretty good job I think managing it.
That makes a lot of sense and last question for me is just on public market volatility and the impact that that might have on private market multiples are you seeing any sense that the volatility we're seeing in the public market.
As weaving its way into the private sector takeout multiples at all or what you are saying not yet not yet, but I would predict it will come.
Sure.
Probably if it takes a good old fashioned credit crunch for that to really change. So two private equity firms have difficulty getting leverage finance the rates they are getting at that today.
Probably.
I'm not going to see any contraction in the multiples still pretty pretty fancy takeout multiples even in Q1 so.
So you saw one in Canada with ICP is pretty pretty nice takeout multiple for that company.
So thats, probably indicative of what's going on in the world that still today.
Well it will not change over the next year or two I think quite possibly.
Okay. That's all my questions. Thanks for the time as always.
Thank you. Your next question is coming from Stephen Macleod of BMO capital market. Stephen Please ask your question.
Thank you good morning, guys holding Steven.
Morning.
Just my first question I wanted to follow up quickly on China, you talked about the differing differing dynamics between domestic manufacturing and export I'm wondering if you could just break down your business in China and how much of it is domestic and how much of it is export.
Well.
I'll comment to the extent I can on that.
So.
Pretty much everything we make it for the <unk> business in <unk>.
<unk> is made in China, not all of it but the vast majority of it. So if you take but the SaaS revenues Theyre all China derive.
So the CCL design, you've got the extent to which the car industry exports, probably its more domestic focused than it is the <unk> focus so that's the factor.
At <unk> as more export focused than it is domestic focus.
So I think the demand level, there that's probably what I would say if we lose demand in one month will pick it up the next because we are dealing with the world market for <unk>.
The Chinese market and then you get into the CCL label business with consumer products, which is entirely domestic focused.
I can break it down for you any more than that Steve Yeah. No. That's that's really helpful. Thanks John .
And in terms of your plants.
Are your plants that are focused on domestic markets up and running right now or are you sort of in a holding pattern.
We had some disruption in April .
I would call. It sporadic so we had some plants closed for a couple of weeks in some cases.
So we saw some impact in April .
From plant closures.
I'd say the bigger impact was the closer to.
More of our customers. So a number of the number of customer factories were closed in the month of April , particularly in the Shanghai region. So that's more of an impact.
<unk>.
Our operations to be honest.
Right. Okay. Thank you.
And then just on the CCL segment, you talked about you do get price obviously.
Can you talk about how volume broke down versus price in the Ccs segment I apologize there is a fire alarm going on right now.
Just to just be guessing.
Okay.
Sorry, Jeff.
No I don't think we can do that.
Okay.
The transactions, we call measured volume in season, the CCL space, Yes.
Okay I understand thank you.
Just for the full year I mean, obviously I know a lot of moving parts, but in the past you've talked about overall demand this year being up in sort of the 4% to 5% range is that still something that you think is a reasonable expectation we would we would hope so.
The current coal to be quite optimistic about.
Some of the news about China hit we are quite optimistic about Q2, so that's the damage really but but that aside.
We still plan to still busy it still got more orders that we can cope with in parts of the business. So.
So the demand picture is still is quite strong but.
But China is a big country, so China catches a cold world.
Not just the U S anymore.
U S is a problem that the cold the rest of the world gets pneumonia, but.
If they get a cold, though as we get a cold too. So so I think that's just something you have to bear in mind.
Okay.
Okay, Great and then maybe just one last one just switching gears a little bit.
<unk> had two quarters of massive price pass through.
What what you think sort of Q2 would look like in that business just given some of the raw material movements and other freight inflation other inflation.
Yeah, well, we always have.
The problem is the Americas margin squeeze that I talked about when we had the dip in <unk>.
<unk> at the end of last year that it bounced back so when you get the bounce back we get the reverse squeeze.
So so we're more optimistic about <unk> in the current quarter.
The number of energy surcharges in Europe .
So.
But it is still difficult.
We've raised prices very extensively at most of our customers are posited all we know that because we are paid for some of it indirectly ourselves.
But.
There is no question in the.
In the film extrusion business, where you you made two calls to resident energy, it's pretty obvious there's been a lot of inflation in both of those categories.
Right, Okay, well. Thank you Jeff appreciate the color.
No problem.
Thank you. Your next question is coming from Mark Neville of Scotia Bank. Please ask your question.
Hey, good morning, Jeff Good morning, Sean.
Great job on the quarter.
If I could follow up on some of these questions.
Maybe to Walters question on price.
Yes.
Waiting on anything sort of to go sort of go after price. So you are not waiting for contracts reset.
Right I think your sometimes we do.
If you've got a contract that's up in June and.
And as.
April comp.
Contract renewal dates July the first we will go in July the first so you've got a whole mix of we've got thousands of these contracts. So so some of them. We do we do depending on who the customer is we will pick our moment.
And <unk>.
We implemented immediately.
When you've got.
No contracted all of it is just what's the price of the product XO products why will we rebuild the inflation in immediately.
So it's a.
Yes.
Very broad picture of different commercial circumstances, but yes, sometimes we do wait because there's no point in rubbing salt in the wound if you don't have to.
Alright, great.
Understood.
And still on pricing.
Could you just sort of maybe just help us on the categorize or help us understand sort of roughly where youre at with pricing I mean are a lot of the actions almost done so there's still quite a bit to do.
Yes.
Yes.
More to do because inflation is still going on.
It felt like easy like it all happened in one month and we just have to then policies we.
We had inflation happening in March.
So it's a permanent battle.
That's the issue really is I think most companies are facing is it's just nonstop.
Just like a wall of water coming down on you and as soon as you got through the first wave and second waves coming at you. So that's the issue it's really it's still it's still going on there.
So there are signs that all the signs of it plateauing out.
But it's been pretty pretty full all so.
That's really the difficulty market small it's not one moment in time the price goes from X to Y just every month.
The price of the components changing and then you have to pass that through but any policy.
Then it goes up again.
Right yes.
I guess and then there will be a I guess ignoring the margin percentage.
Like do you think you'd be able to get enough price to.
To get sort of EBIT dollars back again, I know, there's a lot of inflation in that business.
Or more curious with EBIT dollars I guess percentage, we'll have to wait and see.
We'll just have to wait and see.
So much inflation.
The market needs to settle down.
And I think every all everyone's time.
The mats inflation so.
Z to settle down a bit to be seen where it pans out, but I think the team at <unk> have done.
An excellent job of.
Passing it through I mean, the customers want to hear about the inflationary price pass throughs, but.
Okay.
<unk>.
We're doing it stalled.
The only company in the world doing it.
Sure.
Both the paper, it's freight it think its thesis.
Those advantages.
Bold, it's pallets, it's everything insurance.
Yes, yes for sure I understood.
Just two more checkpoints.
Does the RFID RFID growth does that sort of structurally change or improve the margin for a checkpoint.
Yes.
<unk>.
We've really improved.
The <unk> business out of all recognition from when we bought it five six years ago. So that's the.
From being a loss, making business when we bought checkpoints in 2015 2016.
Soundly profitable business and doing better and better each quarter.
So.
This past quarter MKS was really impacted by the China situation.
And the components inflation in the hardware business, so electronic components.
The inflation around that in China is pretty bad.
Yes.
Last question just on the buybacks.
I think this is the first time that you've been buying stock maybe 10 15 years, maybe longer I'm not sure.
Alright.
So I'd just be curious what the motivation is a more balance sheet, where the stock's trading or just the difficulty doing large M&A.
The culmination of all trades.
I think the stock is very attractively priced right now so.
They are doing what you would expect us to do when the stock is attractively priced so I think the stock's undervalued.
So it seemed like.
It seems like throughout the very good signs and saw.
We have the balance sheet capability to do it no large M&A.
On the Horizon, we've got a nice balance sheet the stock from the underpriced why wouldn't we do it.
Sure sure Alright, thanks, Thanks for the times I appreciate it.
Thank you. Your next question is coming from Michael Glen of Raymond James Michael Please ask your question.
Hey, good morning, Jeff just in terms of.
That checkpoint emas business over in China are you looking at all or has the discussion come up towards looking at some new locations for manufacturing or retiring some of that business yes.
Okay.
And then on the on the <unk> acquisition in Brazil, Im not sure if I'm pronouncing that right, but can you maybe speak to the opportunity.
Within that market. This is a Brazil focused business, but.
Is this something that you want to grow perhaps in North America or Europe .
Good day.
Going to test the water in Brazil.
These are the types of the category.
The Avery kinds of businesses, it's pretty big business around the world.
<unk> is the dominant player in it globally and is.
A number of tier two and tier three players.
<unk>.
By sector.
This company is actually located just down the road.
CCL label operation in Brazil.
Manage it down there is one of the most highly talented people we have in the company.
I wanted to buy this company and we thought it was a good idea. So we did and we'll see how it goes and presented it goes well down there as we know there are lots of other opportunities around the world to expand it but.
The strategy is tested and present and see if it works before we got anywhere else with it.
Can you export that product from Brazil.
Uh huh.
Okay.
And then I think there is a split between <unk> and CCL design on that like can you give us a rough split is.
The vast majority of it will fall on driver.
Okay.
And.
And then also with in terms of semiconductor.
I know, there's a ton of commentary out there and there's a lot of people, giving opinions on what's happening in that market, but just interested in hearing your thoughts on the chips situation are you starting to see these at all do you think the industry has moved.
And the worst of the chip situation, but anything else to that.
Definitely it Hasnt got better for us for sure.
And I think I think the parts problem isn't just chips.
Its components in general so I think.
The supply chain side of.
The automotive.
<unk> electronics because of the shutdowns in China.
Semi brokers.
And that's why everyone's having to wait as long as they're waiting for their cars.
Chips is a huge problem, but it is not the only problem.
So I think there is a lot of people focused on trying to improve it but.
And we buy chips from.
Sure.
If our RFID labels.
We know from that experience thats kind of hand to mouth.
Pretty low end chips compared to the ones that go in Cogs, but.
But we don't see any signs of anything good happening yet.
Okay. Thanks for taking the questions.
Thank you. Your next question is coming from Daryl Young of TD Securities Daryl <unk>.
Hey, good morning, gentlemen, good morning.
Just one quick one for me with respect to Cts segmental.
The CPG companies that are operating in Russia.
Does that present any any market share redistribution opportunities as they maybe look to move.
Move out of manufacturing capacity in Russia for you or is there any commentary you can give there.
No I wouldn't say, that's a factor much of a factor at all actually.
Okay perfect. That's all from me thanks, guys.
Thank you. Your next question is coming from David <unk> of Comox Security David Please ask your question.
Thank you.
A couple of questions.
Just looking at <unk> every.
Segment in that business or was there any segments that actually decline.
Yes.
The positive signs all came out of North America.
International business was not as good but.
But in North America fired on all cylinders.
Okay.
And then just on.
EMEA you Ted.
I'm just wondering if that was up overall.
It being weak in Europe .
MFS was down profits.
Profits were down amendment.
Okay. Okay.
And then.
I think maybe a lot of people are kind of wondering.
How much price increase do you still have to implement.
Recover the inflationary costs.
Right.
Because you have a price increase in March and another one in April yet another one in may.
The prices price increases.
Singular event in time, but the price has gone up 50% you just pass it through it's happening every month everywhere.
And it is not stopping so you've got to constantly be putting the prices up to reflect the current reality and that's the problem.
So the reason there is a lag and I think this applies to all companies.
Hitting all the big CPG.
You make your pricing adjustments and then the next part of the inflation comes in the next month.
That's the challenge, it's when will we when will the way it stopped coming in.
No doubt the comparable because again, that's what we've done by then.
And that's why we say, there's still some more price to power through it because we think we powered through everything everything pretty much that we had through through most of last year, but in Q1, we had more inflation.
No.
Okay alright, thank you.
Therefore.
Thank you. Your next question is coming from Ben <unk> of Pi financial Ben Please ask your question.
Good morning, two quick questions for me just Justin Idaho.
Acquisition.
Like the margin profile.
For that addition is lower than <unk>.
Are you expecting the dis synergies.
It will happen from sort of procurement or or will it be volume growth.
The roads.
One hotel.
Okay.
Okay second question on energy costs.
In Europe .
Europe , specifically, Germany can you quantify where for you.
How how much higher they are compared to February 24th.
When Russia, Ukraine or year over year, how much higher are they.
Sure.
Germany wasn't a big impact for us because we are not without extrude much film in Germany.
So.
CCL label business that our other businesses to use energy, but not to the same extent we use it. So the impact was really all in the U K.
In the <unk>.
<unk> facilitated that's pretty pretty significant.
More than that but very significant so, but I think can see consumers in the continent of Europe , but talking about the domestic heating bills going up by factor of two and three full time, while they were this time last year.
Right.
Okay. Thank you.
For me.
Thank you. Your final question is coming from Adam Josephson of Keybanc Adam.
<unk>.
Just a couple of follow ups for me one on Jeff you made a comment on inflation, even though it's everywhere at the moment you are seeing some signs that it may.
It may be plateauing can you just talk about what what those signs are and how consequential you think they are well we've seen it.
The one the one category where we.
We track it daily as alumina aluminum has started.
It started to drop in the last few weeks.
So thats I think.
A good indicator.
And aluminum is energy dependent as well.
Material dependent but we've seen the price of aluminum drop in North America in the last in the last few weeks not by a lot but by some.
Only headed in one direction for pretty much all of 2021, but.
We did see a dip in the last the last few weeks and we've seen paper prices stabilize a bit.
The UBM strike is now over.
<unk> novel stabilized things embedded in Europe , and take some of the heat out of the paper market.
So thats, probably a good thing too.
Yes.
You mentioned that your plants have more orders than they can produce maybe.
And maybe that was before China locked down but.
Just.
Just intuitively do you understand or does it make sense to you that demand broadly speaking would have remained this good for as long as that has given what's happening in Europe , given weakness in Brazil, et cetera, et cetera et cetera.
Well I think and we haven't seen any weakness in Brazil by the way I mean that Brazil, Brazil business has been very strong wells in Q1 so.
Why medical meant about share down there so.
So we haven't seen any weakness in Brazil.
But.
I would say.
The real question to everyone to try and understand is how much of the demand. We see today is people taking caution in the supply chain to make sure that go where they want.
In an era, where availability is an issue as opposed to how much of it is real and demand related let's say, we don't really know the answer to that.
So the CPG numbers for Q1 were mix right. So some companies did very well Coke P&G.
Others did less well.
So the numbers will make but some did well some didn't.
But.
But I wouldn't say I wouldn't have said we saw.
A crisis in the CPG business in Q1.
Bond level.
And we do know that I think many of them are taking some caution in the supply chain to make sure. They go well they need to be able to supply the demand that's out there.
Yes, yes.
And then last one for me on the CIB can you just remind me why you didnt buyback any in the preceding three quarters, just how much higher the share price was.
And then it wasn't <unk> just to give us a little perspective, along those lines.
Well.
<unk>.
We followed the NCI be a year ago stock prices in the mid seventies last summer.
So when we released our half year numbers.
In August I think to start with that 70 something.
And then we'd be honest upon dredges things changed in Q4, we saw the positive in Q1, when the Ukraine happened, but you have to remember Adam we can't buy stock in a blackout period. So January most of January .
Good post the February we were blacked out.
Got it and have you bought stock subsequent to <unk>.
Got a few disclosed comp.
We could have because we can start buying stock next week.
Right, Okay got it and then black blackout.
Right yes.
Understood. Thank you Jeff.
Sure.
Okay. There appears to be no further questions in the queue I will now hand back over to Jeff for closing remarks.
Thank you very much Jennifer and thank you for everybody joining the call today and we look forward to talking to you again in August . Thank you.
Thank you ladies and gentlemen, this does conclude today's conference call. You may now disconnect your phone lines and have a wonderful day. Thank you for your participation.
The best operator.
Okay.